Frequently Asked Questions
- How do I join the AVC Scheme?
- How does my AVC Plan work?
- What are my AVC options at retirement?
- Can I arrange my AVC with another broker?
- When can I draw down my AVC Investment Account?
- Was the consultancy fee I was charged when I set up my AVC Plan a once-off fee?
- Am I charged a consultancy fee if I top up my AVC?
- Am I charged a consultancy fee each time my AVC contribution increases in line with my salary?
- Can I vary my AVC contributions?
- How does the tax relief work?
- What happens if I stop contributing to my AVC plan?
- If I retire on a low pension, will it affect how I can draw down my AVC benefits?
- What happens if I take a career break?
- What happens if I leave the Public Sector?
- Can Death Benefit be kept in force if I leave the Public Sector?
- What happens to my AVC Plan if I change my retirement plans?
- What happens to my AVC Plan if I die in service?
- What happens to my AVC Plan if I die in retirement?
- What happens to my AVC Plan if I retire early due to illness?
- What happens to my AVC Plan if I am involved in a legal separation or divorce?
- What happens to my AVC Plan at retirement?
- If I have less than 9 years full time Superannuation service - will this affect my AVC?
- Are there alternatives to the AVC Scheme?
- How do I draw down my AVC?
- On what basis are assumptions made regarding salary increases, contribution increases and investment returns in my yearly AVC Benefit Statement?
- Can I track my AVC online?
How do I join the AVC Scheme?
When setting up your AVC plan, you get one-to-one financial advice in the form of a Retirement Benefit Review (RBR) in your home or workplace by one of Cornmarket's specialist consultants. This advice takes into account a wide range of issues which may affect your retirement plans including; Superannuation, NSPs, Early Retirement etc. To request an appointment to set up an AVC call (01) 420 6787
How does my AVC Plan work?
Your AVC provides you with a tax efficient way to build up a sum of money which can be used to buy additional financial benefits for you at retirement.
What are my AVC options at retirement?
At retirement your AVC Investment Account may be used within certain limits imposed by Revenue to:
- Top up your gratuity with an additional tax-free lump sum and/or
- Take a further taxable lump sum at retirement and/or
- Provide a pension in addition to any pension you may be entitled to under the Superannuation Scheme. As with your pension under the Superannuation Scheme, any AVC pension will be treated as earned income for tax purposes and/or
- Invest in an Approved Retirement Fund (ARF) assuming that your total pension income is more than €12,700 (2013 level) and/or
- Purchase extra Superannuation benefits through your employer such as a refund of a marriage gratuity and/or
- Buy benefits under the Purchase of Notional Service (PNS) Scheme.
Needless to say most AVC members opt to take as much as possible as a tax-free lump sum.
Can I arrange my AVC with another broker?
No. The Department of Finance has indicated that there may be only one trust-based AVC Scheme for each trade union group / association within the Public Sector. However, as an alternative to the AVC Scheme, you may now avail of Personal Retirement Savings Accounts (PRSAs) which are available through a number of financial institutions including Cornmarket. In addition, you can also avail of the Purchase of Notional Service Purchase (PNS) Scheme administered by your employer.
When can I draw down my AVC Investment Account?
You can only draw down your AVC benefits when you draw down your Superannuation benefits.
Was the consultancy fee I was charged when I set up my AVC Plan a once-off fee?
Yes. The consultancy fee (currently €525) is a single, straightforward, once-off charge which is deducted from your AVC contributions over the 12 months following the set up of your AVC Plan (a net cost of €315 after tax for the typical member paying tax at 40%).
Am I charged a consultancy fee if I top up my AVC?
No. Members who wish to avail of Cornmarket’s advice and a Retirement Benefit Review when arranging to top up their AVC Plan do not have to pay any consultancy fee. Members who prefer to top up their AVC Plan without any advice may avail of Cornmarket’s ‘execution only’ service. Please call (01) 420 6779 for more information.
Am I charged a consultancy fee each time my AVC contribution increases in line with my salary?
No. There is no consultancy fee whatsoever on any automatic increases in your AVC contributions due to increases in your salary.
Can I vary my AVC contributions?
Yes, you may increase or decrease, stop or re-start your AVC contributions over the years ahead. This is of course subject to the maximum contribution limit set by Revenue and the minimum AVC contribution level of €50 per month (or equivalent). Please note, any change made may take up to two months to affect your salary. Please contact Cornmarket on (01) 420 6779 for more information.
How does the tax relief work?
Tax relief is applied at source. Your employer deducts your AVC contribution from your gross pay before the application of income tax. In effect this means that only the net amount, i.e. after tax relief, is deducted from your salary.
What happens if I stop contributing to my AVC plan?
In general, if you stop contributing to your AVC Plan, your AVC Investment Account will remain invested until you retire. At that point, it is available to you to ‘buy’ the retirement benefits for which you are eligible. You are not eligible to receive benefits from the AVC Scheme until you begin to draw down your benefits from the Superannuation Scheme. If you stop your contributions it may take up to two months to affect your salary.
If I retire on a low pension, will it affect how I can draw down my AVC benefits?
On some occasions, certain Public Sector employees who have particularly short service and/or are on relatively low salaries such as those in job sharing posts for a prolonged period and/or those who retire under the Cost Neutral Early Retirement Scheme may find that their total pension at retirement* is less than €12,700. This has special relevance for those who have an AVC as, in order to avail of the full range of AVC benefits at retirement, your total pension income (including any Superannuation, social welfare pension, etc) must be at least over €12,700. Any income that is not guaranteed for life (supplementary pension, widow’s pension, invalidity pension, etc.) cannot be used to make up the €12,700 a year. If you happen to fall into this scenario your options are as follows:
- As usual, part or all of your AVC Investment Account may be taken as a tax-free lump sum (up to the relevant limit set by Revenue) and
- Any balance up to €63,500 must be used to buy a pension and/or be invested in an Approved Minimum Retirement Fund (AMRF) rather than an ARF.
The essential difference between an AMRF and an ARF is that while you can make a withdrawal net of tax from an ARF at any time, you cannot withdraw any of the capital you’ve invested in an AMRF (although you may make withdrawals from any interest earned) until you reach age 75*. The Government’s logic in setting this rule is that, if you are on a low pension, you should invest your lump sum for the longer term (i.e. in an AMRF) rather than be tempted to spend it in the years immediately after retirement!
It is important that you contact Cornmarket should your circumstances change subsequently, e.g. you decide to retire earlier than anticipated, take a career break or go job sharing. Changes such as these may mean that your income will be less than €12,700 a year at retirement, opening up the possibility that some or all of your AVC Investment Account may have to be invested in an AMRF at retirement.
* Finance Act 2011 legislated that if you subsequently have a pension greater than €12,700 you will then be able to move your AMRF into an ARF.
The Key Question
Are your total pension entitlements (inclusive of state pension benefits) likely to be less than €12,700 a year? If you believe this may be the case, you should contact Cornmarket on (01) 420 6779.
What happens to my AVC Plan if I take a career break?
If your AVC Plan has no death benefit:
You should write to Cornmarket as soon as you are certain you are going to take a career break. Your contributions will of course cease as soon as your salary stops. In the interim the value of your AVC Investment Account will continue to reflect the returns earned by the investment funds. Upon returning to your job, your AVC should automatically start again. You may also wish to consider increasing your AVC Plan at that stage to make up for the shortfall resulting from the years of service you missed whilst on career break.
If your AVC Plan has a death benefit:
You may well wish to keep this important cover in force while on your career break. Provided your AVC Plan has been in force for at least 1 year, cover can be continued for the duration of your career break. The death benefit must be paid for from your AVC Investment Account and therefore can only be provided as long as there is still enough money in your AVC Investment Account to do so. You should bear in mind that using your AVC Investment Account to pay for death benefit while you are on career break may have a significant effect on the amount available to provide you with other benefits at retirement. If you do not contact Cornmarket, the cost of providing your death benefit will continue to be deducted automatically from your AVC Investment Account. Therefore, if you do not wish to continue your death benefit you should notify Cornmarket so that your death benefit can be suspended for the duration of your career break.
Please remember that if you do cancel your death benefit, when you return to work following your career break you will have to sign a medical declaration confirming you are in good health before your death benefit can be reinstated.
What happens to my AVC Plan if I leave the Public Sector?
If you resign, Revenue insists that your AVC benefits are treated in the same way as your benefits under the Superannuation Scheme:
- If you are entitled to a refund of your Superannuation contributions, you must also draw down the value of your AVC Investment Account when you resign. The amount to be drawn down will be subject to tax at 20% under current Revenue regulations.
- If you are not entitled to take a refund of your Superannuation contributions, you must leave your AVC contributions in your AVC Investment Account until retirement.
Can Death Benefit be kept in force if I leave the Public Sector?
If your AVC Plan includes a death benefit you may well wish to keep this important cover in force if you leave the Public Sector. This is normally possible provided you are under age 50 and not leaving work due to retirement (on grounds of ill health or otherwise) or redundancy. You may take out an individual policy with Irish Life without further medical evidence provided the amount payable under the individual policy does not exceed the death benefit under your AVC Plan.
In order to avail of this valuable option you must contact Cornmarket or Irish Life within 31 days of leaving the Public Sector. A suitable policy will be issued and the premium calculated based on your age at that time. This option is only available if you were originally accepted at ordinary premium rates (i.e. without any requirement to pay extra premiums or subject to any exclusions) and are not taking a job in the armed forces of any country at war. Please bear in mind that in contrast to your AVC Plan, you may not be entitled to tax relief on the contributions to your new policy.
If your AVC is currently with Aviva, Zurich or Friends First please contact Cornmarket on (01) 420 6779.
What happens to my AVC Plan if I change my retirement plans?
When joining the AVC Scheme you indicated a chosen retirement age. However, your plans for retirement may change over the years – for instance you may decide that you want to retire at an earlier or later date than the date you originally indicated when setting up your AVC Plan.
Should your chosen retirement date change it is very important that you contact Cornmarket or Irish Life. This is because a change in your chosen retirement date may have consequences for your investment strategy and benefit entitlements under the AVC Scheme.
If your AVC is currently with Aviva, Zurich or Friends First please contact Cornmarket on (01) 420 6779.
What happens to my AVC Plan if I die in service?
If you have no death benefit under your AVC Plan
The value of your AVC Investment Account at the date of your death will be paid out to your estate free of taxes.
If you have death benefit under your AVC Plan
The amount of the death benefit (up to 2 1/2 x current annual salary) and any dependants’ pensions payable on your death in service which you may have built into your AVC Plan will be paid out to your estate free of taxes.
The value of your AVC Investment Account at the date of your death will also be paid out to your estate free of taxes.
What happens to my AVC Plan if I die in retirement?
At retirement (subject to Revenue limits) you can decide to use some of your AVC Investment Account to ‘buy’ a pension for your dependants in the event of your death.
If at retirement you use some or all of your AVC to buy a pension, you can choose to guarantee that it be paid for a specific period regardless of whether you die before that period runs out.
Example: If you buy a pension with your AVC that has a 5 year guarantee, your pension is paid for the rest of your life. However, should you die within the first five years of retirement then your pension will continue to be paid to your estate for the balance of the 5 year guarantee period. If you die after the 5 year guaranteed pension has run out, your pension will end at the date of your death.
What happens to my AVC Plan if I retire early due to illness?
If you retire on grounds of ill health your AVC Investment Account will be used to ‘buy’ the retirement benefits for which you are eligible, subject to Revenue limits. Please note that as you may receive additional years from the Department, this may affect how you can draw down your AVC at retirement. If you are also a claimant under your union’s Salary Protection Scheme, the benefit you receive under that Scheme will not be affected in any way by your entitlements under your AVC Plan.
What happens to my AVC Plan if I am involved in a legal separation or divorce?
If you are involved in a legal separation or divorce, a pension adjustment order may be granted by the Courts over the benefits payable from the AVC Scheme on your retirement or death. Further information on how pension adjustment orders work is available from your solicitor or from:
The Pensions Board,
28/30 Lower Mount Street,
Tel: (01) 613 1900 Fax: (01) 631 8602
Locall: 1890 6565 65.
What happens to my AVC Plan at retirement?
Your AVC Investment Account is used to ‘buy’ your chosen benefits at retirement, subject to Revenue limits. You do not have to make a final decision about how you want to take your retirement benefits until you reach retirement. It is important, however, that you plan ahead so that the amount in your AVC Investment Account will be adequate to buy your preferred choice of benefits.
If I have less than 9 years full time Superannuation service - will this effect my AVC?
No. Previously, under Revenue rules, in order to avail of any tax-free lump sum from your AVC at retirement, you must have had at least 9 years’ Full-Time Superannuable Service. Cornmarket, with the support of a number of unions, brought this rule to the attention of Revenue who have confirmed that they are removing it. You are still required to have 9 years Superannuation service to avail of any tax-free lump sum from your AVC at retirement.
Are there alternatives to the AVC Scheme?
YES - The Purchase of Notional Service (PNS) Scheme and the Personal Retirement Saving Accounts (PRSA) AVC.
Option 1: The PNS Scheme
Your employer administers the Purchase of Notional Service (PNS) Scheme for members seeking to ‘buy’ Superannuation credit for missed years of service.
Below you will see the advantages and disadvantages of both the PNS and AVC Schemes. This information is taken from the Pensions Board booklet Purchase of Notional Service (PNS) and Additional Voluntary Contributions (AVCs) which is available online at www.pensionsboard.ie
Weighing up your options
The PNS Scheme
You know exactly how your pension
benefit will be calculated.
Not open to those who will have full service
at their normal retirement date.
You know what it will cost.
Not open to those who will have total service
of less than nine years at their normal
PNS is a defined benefit.
If you retire earlier than anticipated, you will
not get the full benefit you expected.
Contributions attract tax relief.
No flexibility in where the purchased service
is applied, i.e., can’t make up shortfall in lump
Cannot turn the investment into an Approved
Retirement Fund (ARF).
The AVC Scheme
you can stop/start contributions.
AVCs are a defined contribution arrangement
so the individual bears the risk.
You have control over where fund is used
(subject to Revenue limits) i.e. can fund
to maximise the tax free lump sum only.
AVC contributions are subject to fees and
Contributions attract tax relief.
You won’t know what the fund will be until
You have the option to invest in an ARF.
You can use the fund to avail of PNS.
You can help to fund early retirement.
Option 2: The PRSA AVC Scheme
Another alternative is a PRSA AVC which works in the same way as an AVC. Please be aware that unlike your AVC, where the tax relief is provided automatically, the majority of PRSA AVCs can only be paid by Direct Debit which may mean that you need to contact Revenue every year to claim your tax relief.
For more information please contact Cornmarket on (01) 420 6787.
How do I draw down my AVC
Please click here for details
On what basis are assumptions made regarding salary increases, contribution increases and investment returns in my yearly AVC Benefit Statement?
Given the complex nature of pensions the industry is heavily regulated in order to help protect the consumer. Direction on how Illustrations of expected benefits or statements of reasonable projections should be prepared is included within three main pieces of legislation.*
Each of these pieces of legislation explains that the illustrations of benefits must be prepared in accordance with guidance provided by the “Society of Actuaries in Ireland”. In general, the thinking behind setting the assumptions is that they are in keeping with historical experience over a long period of time, are consistent with each other and also allow direct comparisons between providers.
Increases in Salary and Contributions
It is assumed that salary and contributions will grow by 2.5% a year, as per the guidance provided by the Society of Actuaries in Ireland, effective from 1st April 2016. Previously the rate assumed was 3% a year.
In projecting fund growth, there is also an investment return assumption made in accordance with the guidance provided by the Society of Actuaries in Ireland.
The rate of return assumed for any investment fund must be determined based on:
- the underlying assets held in the fund and,
- what percentage of each asset class is typically held.
Different types of assets have a different growth rate assigned to them. For example, Equities and Property are 5%, Bonds are 2.5% and Cash is 1% per annum. All of these have reduced over the last few years.
For projections where an individual has opted for an investment strategy which might include a mix of funds, the projection must use the appropriate rate of return on a monthly basis in the calculations. For example a strategy that invested in equities up to 10 years before expected retirement and then gradually moves to cash, will use a reducing blended rate in the projection calculation for the anticipated movement in funds.
Impacts on projected retirement outcomes due to April 2016 reduction in assumptions
It will come as no great surprise that if the assumptions that must be used for future investment growth are all reducing, then the projected final funds at retirement will be lower. The further away someone is from retirement, the greater the reductions will be on fund values. For someone 5 years from retirement, the impact will be just under 5%, for someone 20 years from retirement; the impact is around 15%*.
Cost of Pensions
The changes in basis for calculating the cost of pension means that this cost is expected to be more expensive. The average increase in the cost of pensions is around 5% for those projections where the long term basis is to be used, where retirement date is in more than 5 years’ time. For projections where the market cost of buying a pension is used, the impact will depend on the cost of pensions at the time the projection is completed. At the moment (March 2016) the cost of buying a guaranteed pension is very expensive due to historically low interest rates, and the cost of pension is around 20% more expensive than the long-term cost assumption.
The change here has two impacts. First of all, a reduction in assumed future salary increases means that the amount of future contributions assumed to be paid into the plan will be lower, which means projected future retirement funds will be lower. As expected future contributions make up a bigger portion of someone’s projected final retirement fund the further away from retirement they are. How far someone is from retirement again influences how big the likely impact is. For someone with 20 years to go to retirement, a typical reduction in projected retirement fund is around 2%*.
The reduction in assumed future salary increases does however, have a positive impact on projected retirement outcomes when we consider replacement ratios, which is what percentage of final salary someone’s pension is expected to be. This is because the projected salary figure at retirement is now lower. Again, looking at someone 20 years from retirement, the fall in projected salary at retirement is around 9%. So while the first three changes in our example reduce the projected pension at retirement by around 20% combined, this last point halves the impact of that projected fall on the expected replacement ratio*.
*Pensions Act, 1990, Occupational Pension Schemes (Disclosure of Information) Regulations, 2006 (S.I. No. 301 of 2006) Trust RACs (Disclosure of Information) Regulations, 2007 (S.I. No. 182 of 2007)
Can I track my AVC online?
Irish Life - Pension Planet is a secure web facility which will allow you to view a much wider range of details about your AVC Plan than ever before. By logging on to ‘Pension Planet’ you have access to information on your AVC Plan at the touch of a button. This user-friendly system allows you to track your AVC Plan 24 hours a day from your computer. You will be required to key in your AVC member reference number (as provided on your annual benefit statement).
Click here to log on to pension planet
Friends First - Members can access details of their Pension Scheme contracts through Friends First’s Secure Online Service Centre. This provides access to a range of information specific to your Plan. The site also provides fund and performance information, including latest factsheets and commentaries on Friends First funds. To access the Online Service Centre, members can simply register online at www.friendsfirst.ie/service. Friends First will then issue you with their unique log-on details by post.